Saturday, October 22, 2005

Special Counsel Fitzgerald's New Website

On Wednesday, Special Counsel Patrick Fitzgerald's office put up a website (here) through the Department of Justice that contains documents related to the case, the most recent being an Aug. 27 memorandum from the Deputy Attorney General about supervision of the Special Counsel.  The site is still rather barren, with links to documents appointing Fitzgerald, two press statements, and the decision on the reporter's privilege.  A Los Angeles Times story (here) notes that the spokesman for the office cautioned not to read into the decision to launch the site anything about possible decisions to seek indictments, noting that the website was long overdue.  It's awfully hard to resist doing so, however. 

Adding fuel to the fire, a Reuters article (here) states that the grand jury investigating the leak of Valerie Plame's identity as a covert CIA operative met on Friday with two prosecutors from the Special Counsel's office, but it does not appear that any witnesses were called to testify.  As the legal advisers to the grand jury, it is a fair assumption that the prosecutors' discussion concerned whether the evidence gathered during the investigation meets the requirement to return an indictment: probable cause.   Even with that fairly low threshold for an indictment, it is doubtful in a high profile case like this that the Special Counsel would seek an indictment unless there is strong evidence of criminal conduct. (ph)

October 22, 2005 in Investigations, Prosecutors | Permalink | TrackBack (0)

What Will Ken Lay Say?

Defense lawyers usually tell their clients who have been charged with a crime to lay low and not make any public comments.  Former Enron CEO Ken Lay, who has a website to advance his position, will be speaking to the Houston Forum on December 13 about the downfall of Enron.  The speech, a bit more than a month before jury selection begins for the conspiracy trial of Lay, Jeffrey Skilling, and Richard Causey, is advertised on the Forum website (here) in the following way:

Ken Lay speaks on the collapse of the wunderkind company one month prior to his trial in U.S. District Court. We have heard from the Enron Whistleblower Sherron Watkins and New York Times Investigative Reporter Kurt Eichenwald, author of "A Conspiracy of Fools." Now we will hear from the man himself about the collapse that rattled Wall Street and the corridors of political power.

A Houston Chronicle story (here) discusses the planned speech, and quotes Lay's attorney, Mike Ramsey, did not express any discomfort with the speech, noting that "Enron's collapse hurt the community. I think Ken owes it to the community to explain his view."  Does this mean the Lay is likely to testify at the trial to  present his views to a much more important audience: the jury?  I suspect at least one member of the Enron Task Force will be in attendance to gather a little intelligence. (ph)

October 22, 2005 in Enron | Permalink | TrackBack (0)

DeLay Seeks Recusal of Judge

Another day, another sideshow at the circus in Austin, Texas, surrounding the state prosecution of Rep. Tom DeLay on conspiracy and money laundering charges.  At his scheduled arraignment before 331st  Judicial Criminal District Court Judge Bob Perkins (website here), the court first took up a defense request for the appointment of a new judge because Judge Perkins has contributed to MoveOn.Org and, according to defense counsel Dick DeGuerin, the organization has been selling t-shirts emblazoned with Delay's mug shot (which is actually quite a nice photograph for that genre).  Judge Perkins noted that he contributed to the organization before the 2004 election, and MoveOn denied selling such a shirt.  The Judge has not ruled on the motion, and this is probably just another small part of a much bigger scene that will play out. An AP story (here) discusses the recusal motion. (ph)

October 22, 2005 in Prosecutions | Permalink | TrackBack (0)

It's Not Worth Your Career

The U.S. Attorney for the Eastern District of Virginia announced the guilty plea of Thomas Perry for giving illegal gratuities to federal and contract workers to receive government contracts for transportation services.  What is interesting about cases like this is how modest the gratuities usually are, as compared to the loss that will be felt by the employees and payors from a criminal conviction.  According to the government's press release (here): "The items of value consisted of, among other things, lunches and dinners at various restaurants in the Hampton Roads area, an open tab at a delicatessen in Portsmouth, Virginia, airline tickets, concert tickets, NASCAR race tickets, hotel room charges, sports memorabilia, and a jacuzzi."  I know how popular NASCAR is, but would you trade your career for a pair of tickets? (ph)

October 22, 2005 in Corruption | Permalink | TrackBack (0)

What Was Rick Mariano Doing Way Up There?

Philadelphia City Councilman Rick Mariano has been the target of a federal grand jury investigation into possible corruption, and an indictment is widely considered likely in the near future.  Yesterday, Mariano was spotted at the base of the William Penn statute atop City Hall, and the immediate reaction was to call the police and fire department because of a possible suicide attempt.  A Philadelphia Inquirer story (here) notes that after begin escorted down by Mayor James Street, authorities speculated that Mariano just wanted some space to think and was not considering suicide -- a more likely explanation unless there were another heartbreaking Eagles loss. Mariano is being investigated for, among other things, having his credit-card bills paid in exchange for support for projects. (ph)

October 22, 2005 in Corruption, Investigations | Permalink | TrackBack (0)

Friday, October 21, 2005

Just For Feet's Former CFO Settles SEC Securities Fraud Case

Eric Tyra, the former CFO of Just For Feet, Inc., settled an SEC securities fraud action alleging accounting fraud related to the booking of receivables and write-downs for obsolete inventory.  Tyra agreed to pay $1 in disgorgement, a token amount that allows for the imposition of a $67,500 civil money penalty and a ten-year bar from serving as an officer or director of a publicly-traded company.  According to the SEC's Litigation Release (here):

The Commission's Complaint, filed on May 21, 2004 alleged various fraudulent practices in connection with the financial statements of Just for Feet, Inc., a large shoe and sports apparel retailer formerly headquartered in Birmingham, Alabama. The Complaint alleged that Tyra, Just for Feet's chief financial officer, and others, among other things, recorded on Just for Feet's books unearned receivables and failed to create an adequate reserve for excess or obsolete inventory. The overstatement of income and assets resulting from this misconduct was reflected on Just for Feet's financial statements included in its Form 10-K filed for fiscal year 1998, Forms 10-Q filed for the first and second quarters of fiscal year 1999, and in its registration statements on Forms S-8 and S-4 filed in May and June of 1999, respectively.


October 21, 2005 in Civil Enforcement, Securities, Settlement | Permalink | TrackBack (0)

The Nicest Mug Shot I've Ever Seen


The mug shot of Rep. Tom DeLay, taken when he turned himself in on the arrest warrent issued in connection with the conspiracy and money laundering charges filed in Travis County, is among the nicest I've ever seen.  It is certainly much better than Nick Nolte's (available on The Smoking Gun here).  An AP story (here) discusses DeLay's attorney, Dick DeGuerin, who is well-known in the defense bar and is a Democrat. (ph)

October 21, 2005 in Prosecutions | Permalink | TrackBack (0)

RICO Charges Filed Against Former Maryland State Senator

The U.S. Attorney for the District of Maryland announced the indictment of former state Senator Thomas Bromwell, his wife Patricia, and the CEO of a corporation, David Stoffregen, for using his office to conduct a RICO enterprise involving mail/wire fraud and extortion related to the award of state contracts to Stoffregen's company. Outside of the organized crime and drug areas, the main use of RICO these days seems to involve political corruption cases (e.g. Atlanta's former mayor Bill Campbell and former Illinois Governor George Ryan).  According to the press release (here) issued by the USAO:

The indictment alleges that during the late 1990s and early 2000s, Stoffregen provided various benefits to Senator Bromwell in exchange for Bromwell’s agreement to use his influence and official position as a state senator to assist Stoffregen and his company, Poole and Kent. Alleged benefits that Bromwell received include construction work valued at more than $85,000 on a new house built in Baltimore County in 2000 to 2001 that was provided by Stoffregen for free or at a reduced cost; and more than $192,000 in payments provided to Mary Patricia Bromwell from January 2001 to May 30, 2003 for a no-show job at Namco Services Corporation.

The indictment further alleges that Senator Bromwell, who was chair of the Senate Finance Committee, used his influence to help Poole and Kent win a multi-million dollar bid to perform the mechanical subcontract on the University of Maryland Medical System’s (UMMS) Weinberg Building in downtown Baltimore. Bromwell also allegedly intervened in various business disputes on Poole and Kent’s behalf, including contract disputes with UMMS and the State of Maryland regarding the Juvenile Justice Center construction project.


October 21, 2005 in Corruption, Prosecutions, RICO | Permalink | TrackBack (0)

Thursday, October 20, 2005

Judith Miller's Testimony to Senate Committee on the Judiciary

Judith Miller testified before the Senate Committee on the Judiciary.  Her testimony found here was to "urge [Congress] to enact the Free Flow of Information Act so that other journalists will not be forced, as [she] was, to go to jail to protect their sources."  The protection of reporters sources is clearly important to the public obtaining information that might not be forthcoming by the government.  (see post here)

But in one passage of her testimony she discusses the BALCO case.  She says "[t]he leakers in the Balco case in San Francisco violated grand jury secrecy rules or laws, but their information about steroid use in professional baseball gave Congress the facts and impetus to start hearings and make needed reforms."

Is she suggesting that leaks from the grand jury are good and sometimes necessary?  Wouldn't Congress have eventually received this information without this leak?  It is one thing to allow reporter's to protect sources, and for reporters to bring out information that might not have been disclosed absent the confidentiality being provided to the source. But this seems different than saying it is OK for someone to violate the grand jury rules as long as they tell the information to a news reporter.   

Grand jury leaks should not be tolerated.  This is especially true when the leak is to a newspaper reporter who then may be disclosing it to the world.  The importance of grand jury secrecy is undermined when individuals covered by the grand jury rules will be able to tell reporters anything and be protected by this process. 

In finding a fair balance between confidentially of news sources and grand jury secrecy, it is important to factor in both values and not just protecting the sources.


October 20, 2005 in Media | Permalink | TrackBack (0)

Rove + Libby = ?

An AP report (here) discusses various conflicts in the testimony of Karl Rove and I. Lewis Libby that indicates Libby may have contacted reporters about the status of Valerie Plame as a CIA operative and not the other way around.  Rove also testified that he may have learned about Plame from Libby, although as with everything else in this investigation, the recollection is hazy, at best.

Almost like the pieces of a giant puzzle, the information coming together points to some serious inconsistencies in the testimony of Libby, the chief of staff to Vice President Cheney, about his contacts with the press and the source of his knowledge of Plame.  Whether they are enough to pull together into an indictment for false statements, perjury, or obstruction is a different matter, however.  While contradictory statements are wonderful for cross-examining a witness, proving a person lied (as opposed to being nonresponsive) in the grand jury is much more difficult. "Might" and "may have" do not make for the types of falsehoods usually prosecuted. As more information leaks out about the grand jury testimony of witnesses, I wonder whether claims of prosecutorial violation of the secrecy requirements of Rule 6(e) will surface. (ph)


UPDATE:  An extensive Washington Post story (here) discusses the role of various administration officials in the investigation. (ph)

October 20, 2005 in Grand Jury, Investigations, Media | Permalink | TrackBack (0)

Arrest Warrant Issued for DeLay

The twin indictments of Rep. Tom DeLay for conspiracy and money laundering have resulted in the issuance of an arrest warrant which will require him to appear at a Texas courthouse to be photographed and fingerprinted. Delay is scheduled to appear at the Fort Bend County sheriff's office for the booking procedure. It's unlikely there will be the perp-walk that was seen in the Enron, WorldCom, and Adelphia cases (among others), but there will be a mug shot, which is usually so flattering (think Nick Nolte), and fingerprinting.  An AP story (here) notes that DeLay will be released on a $10,000 bond.  This may well generate even more contribution's to DeLay's campaign committee.  His campaign website ( has the following letter:

As you probably know, the very partisan Travis County D.A. recently manufactured an indictment against me that is based on charges from the 2002 Texas State House elections. These charges are groundless and false.  I am completely innocent. Just as Senator Kay Bailey Hutchison and other public officials have defeated similar attacks from this D.A., I will prove his allegations are baseless and without merit. Despite this partisan distraction, I will continue to represent you and fight for the interests of our community. I hope you’ll take a moment now to read more about exactly what is happening and why. Thank you for visiting and I look forward to keeping you up to date on our fight against this out of control DA.

"Very partisan" and "out of control" in the same letter probably means this one is not going to get any friendlier in the near future. (ph)

October 20, 2005 in Prosecutions | Permalink | TrackBack (0)

Subpoena to Lawyer Quashed as "Unreasonable or Oppressive" Under Rule 17(c)

The Ninth Circuit upheld a district court order quashing a federal grand jury subpoena to defense counsel because compliance would have effectively destroyed the attorney-client relationship.  Federal Rule of Criminal Procedure 17(c) permits a court to quash a subpoena if it is "unreasonable or oppresive," a standard that is very difficult to meet under the analysis in United States v. R. Enterprises, 498 U.S. 292 (1991), that views grand jury subpoenas as presumptively reasonable.  In United States v. Bergeson (here), the defense attorney, Nancy Bergeson, was subpoenaed to testify before a grand jury about her communication with her client, Michael Casey, about his trial date after Casey failed to appear.  While Bergeson conceded her communication with Casey of the trial date was not privileged (apparently on the same basis that courts have held client identity and fee information is generally unprotected), the Ninth Circuit held that quashing the subpoena was proper because requiring her to testify against her client would interfere with the attorney-client relationship when the government had access to other sources of information to prove Casey's knowledge of the trial date (an element of the offense of bail-jumping). 

The court stated: "That the government does not need the testimony bears on whether the subpoena is 'unreasonable,' and that it would destroy the attorney-client relationship bears on whether the subpoena is 'oppressive.'"  The Ninth Circuit also noted that the U.S. Attorney's Manual, which states that all reasonable alternatives should be pursued before issuing a subpoena to an attorney to testify against a client, cut in favor of quashing the subpoena:

There were good reasons for the district court’s exercise of discretion. A client’s confidence in his lawyer, and continuity of the attorney-client relationship, are critical to our system of justice. The Justice Department restraints on issuing subpoenas to lawyers that we discussed in  United States v. Perry and that the district court cited in this case are instructive on this point. Though these Justice Department directives are directions by an employer to its employees and not law, they demonstrate the recognition that the government has given to this fundamental interest. Issuing subpoenas to lawyers to compel them to testify against their clients invites all sorts of abuse.


October 20, 2005 in Defense Counsel, Grand Jury | Permalink | TrackBack (0)

Wednesday, October 19, 2005

What Will Patrick Fitzgerald Do?

The tension level must be pretty high for some people in Washington,D.C., as all wait to see what Special Prosecutor Patrick Fitzgerald will do in the final days of this grand jury investigation.  Will he ask to re-up the grand jury, end the investigation without indictments, or indict someone or several people?

As noted here, the rumors are flying.  The Washington Post reports here that "Cheney's Office is a Focus in Leak Case." The New York Times focuses here on whether the indication that Fitzgerald might not issue a report in the case might be an indication of forthcoming indictments, although whether a report is even proper here is questioned. And TalkLeft continues here to speculate on the timing of whatever might be forthcoming from the grand jury.


October 19, 2005 in Investigations | Permalink | TrackBack (0)

Security Clearance for Miller

Many are still baffled over Judith Miller's claim that she had a security clearance. (see post here and here). As noted by Bob Bateman (author of No Gun Ri) on the PoynterOnline Site (Romenesko) he writes from Baghdad here stating, "By the way, does anybody know if she contends it was a clearance for 'Classified', 'Secret', or 'Top Secret'?"


October 19, 2005 in Investigations | Permalink | TrackBack (0)

Sentencing in BALCO Related Cases

Victor Conte, founder of BALCO received 4 months in prison and 4 months of home confinement in his sentencing today. Two others were also sentenced today, namely the VP of BALCO, who received probation, and Greg Anderson, Barry Bonds' trainer, who received a sentence of 3 months in prison and 3 months home release (See Sports Illustrated - Reuters here;  Mercury News here).  These sentences result from a plea agreement with the government.   (see post here).  (See also DOJ press release here)  (esp)

October 19, 2005 in Sentencing | Permalink | TrackBack (0)

Major Katrina Fraud

The Wall Street Jrl reports here of 15 indictments in a cases alleging fraud resulting from Katrina recovery efforts.  Some of the individuals who were charged worked for Spherion Corp. a company that had an agreement with the Red Cross to assist with Katrina recovery efforts. Obviously, the Red Cross and Spherion are not happy about the alleged criminality occurring under their roof. It seems that the money was not getting to the victims, but rather landing in the hands of some relief workers. Earlier the USA for the Eastern District of California reported in a press release that individuals working at call centers obtained claim information and then used the information to improperly obtain payments. Considering the amount of money needed in this relief effort and the vast number of people necessary to disburse these funds, incidents like this are likely to occur.  They are sad.


October 19, 2005 in Fraud | Permalink | TrackBack (0)

Tuesday, October 18, 2005

Could VP Cheney's Office Be Involved?

Check out the "Rumor" Headline of USNews & World Report here.   

But wait, Judith Miller said in her NYTimes article here:

"Before the grand jury, Mr. Fitzgerald asked me questions about Mr. Cheney. He asked, for example, if Mr. Libby ever indicated whether Mr. Cheney had approved of his interviews with me or was aware of them. The answer was no."

Why was Patrick Fitzgerald asking Miller about whether Cheney knew anything? What other questions did the prosecutor ask about Cheney and what were her answers?


October 18, 2005 | Permalink | TrackBack (0)

Choose Your Friends Wisely

Yet another Republican lawmaker appears to be having some problems.  According to the Washington Post, this time it is Rep. Robert W. Ney (R-Ohio).  Ney's biggest problems seems to be his friendships with recently indicted individuals - Jack Abramoff and Tom DeLay. A detailed story that includes everything from an antenna contract, a Scotland trip, plus more are all covered in the Washington Post here.


October 18, 2005 in Investigations | Permalink | TrackBack (0)

Who will be Indicted, if anyone, in the case of the leak of a CIA Agent's Name?

Patrick Fitzgerald's time is running out, unless of course he asks the court to re-up the grand jury for another term. One has to admit that this investigation has been conducted absent the leaks one often finds in high profile cases. The information we read all comes from individuals who have testified before the grand jury and are not within the secrecy scope of 6(e) of the Federal Rules of Criminal Procedure. The weblog "TalkLeft" here considers Fitzgerald's announcement to speak in DC, as opposed to Chicago, a statement of forthcoming indictment(s).  I prefer to just say stay tuned.


October 18, 2005 in Investigations | Permalink | TrackBack (0)

10 More Indicted in KPMG Case

TaxProf reports here that 10 more were indicted in the KPMG Case.  They provide the indictment here.  It is without doubt a sad indictment to read. The accused are highly educated individuals.  Some partners, some with masters in tax law, some lawyers and some CPAs.   

Court One alleges conspiracy, Counts 2-40 allege tax evasion, 41-44 allege evasion of Ruble's Income Tax, and 45-46 allege Obstruction of the IRS.  One has to give USA Michael Garcia some credit here for 1) indicting individuals and not proceeding the way the government did in the Arthur Andersen case; 2) in all but the last 2 counts focusing on substantive allegations as opposed to taking a "short-cut" and charging crimes like false statements or obstruction.

In reading the indictment, paragraph 58 was the most bothersome.  It states that "[t]he conspirators also attempted to conceal their fraudulent tax shelter activities by attempting to cloak communications regarding those activities and certain of the activities themselves with the attorney-client privilege, although the communications in question were not privileged." 

The attorney-client privilege has been under scrutiny in recent months.  The government has asked for waiver of the privilege in deferred prosecution agreements - something that was part of the KPMG settlement (see post here).  Groups have been vocal in opposition to the posture taken by the government. It is important to note here that the allegations in paragraph 58 do not provide a basis for the government claiming the need to pierce the attorney-client privilege.  If the allegations in paragraph 58 prove accurate, there is no attorney-client privilege.  The privilege has aways contained a crime-fraud exception. The government cannot use this scenario to justify a request of a company to waive the attorney-client privilege.


October 18, 2005 in Prosecutions, Tax | Permalink | TrackBack (0)